Why BE Aerospace Is Indispensable

Aircraft interior component maker BE Aerospace (NAS: BEAV) seems to have benefited lately from the increase in demand for air travel as more and more airlines are buying new planes that invariably lead to more contracts for this company. So does that really make BE Aerospace a foolproof stock to invest in?

Let's put BE Aerospace under the microscope and analyze the company's strengths, weaknesses, opportunities, and threats to reach our conclusion.

Strengths

BE has a diversified client portfolio with customer relationships spanning over 200 airline companies, which reduces its risk concentration to a large extent. The company's customers include two of the world's largest carriers -- United Continental and Delta Air Lines. In fact, in 2010, airline biggies such as Boeing (NYS: BA) and Airbus together accounted for only 9% of the company's sales.

BE consistently posted high growth numbers all through 2011 and in the first quarter of 2012 as well. During these five quarters, the company's bottom line grew by 49%, 47%, 59%, 84%, and 43%, respectively.

Minimal competition is a major area of strength for the company. BE is a one-stop shop for all aircraft makers for their cabin component requirements, and the only listed company in this business. Although there are other aerospace suppliers such as Hexcel (NYS: HXL) and TransDigm (NYS: TDG) , these companies do not deal in the supply of aircraft interior components.

The company has a valuable backlog of $8.1 billion, which is more than triple the value of its sales generated in 2011.

Weaknesses

BE drastically increased its long-term debt in its first quarter of 2012. The debt-equity ratio stands at an alarming 96.5% compared to 73.7% during the prior-year period.

Opportunities

BE's commercial aircraft business accounts for almost half of its total sales. I feel this is one area the company should really concentrate on, given the fact that airline companies have started buying more and more new aircraft to cater to the increasing passenger traffic.

Rising fuel expenses is another area of concern for almost all airline companies. This has led to many of them replacing their fleet of ageing aircraft for newer, fuel-efficient ones, which translates into more business for companies like BE Aerospace.

Threats

At the same time, a global economic slowdown in certain parts of the world has led to some airline companies facing a cash crunch. This has the potential to hurt BE's order book.

Entry of new players into the market is a significant threat to the company. Also, BE can be hurt if companies such as Hexcel and TransDigm plan on expanding their scope of businesses to encompass aircraft interiors as well.

The Foolish takeawayBE Aerospace looks like a winner in the long run, thanks to increased airline passenger traffic. The company does have some significant areas of strength that clearly outweigh its weaknesses. If BE's growth story interests you, add this stock to your watchlist to stay updated on all its news and analysis for free. Click here!

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